Referral fees are legal in the UK in most sectors, but they are banned in one important area: personal injury work. Whether a payment for an introduction is lawful depends on the sector, the professional code that applies, and how the fee is structured and disclosed. So the honest answer to whether referral fees are legal in the UK is: usually yes, sometimes no, and often "yes, but only if it is disclosed".
This guide sets out where referral fees are allowed, where the LASPO ban bites, and how the professional rules for solicitors and insolvency practitioners sit on top of the general law.
It is written for firms and referrers who want the broad legal position before applying it to insolvency introductions in particular.
Are referral fees legal in the UK? The short answer
A referral fee is a payment made for introducing a client, or a piece of work, to another business. In ordinary commercial life, that is a normal and lawful arrangement.
The position falls into three broad groups:
- Lawful and common — most commercial, property and business-to-business introductions.
- Lawful but regulated — work governed by a professional code, where fees are allowed only with disclosure and safeguards.
- Banned — referral fees in personal injury cases, prohibited by statute.
Getting the category right matters, because the same payment can be perfectly proper in one context and a disciplinary matter in another. Much of the confusion comes from headlines about the personal injury ban being read as a ban on all referral fees. It is not. The ban is narrow; the general freedom to pay for an introduction is wide.
LASPO and the personal injury referral fee ban
The main statutory ban comes from the Legal Aid, Sentencing and Punishment of Offenders Act 2012. Sections 56 to 60 created the LASPO referral fee ban, which stops regulated people paying or receiving referral fees for personal injury claims.
The ban covers solicitors, barristers, insurers and claims management companies. It was introduced to curb the market in referral fees for personal injury claims, which was seen as pushing up motor insurance costs.
In this field, the ban applies whether the payment goes directly or through an intermediary, and it cannot be sidestepped by calling it something else. Regulators treat the substance of the arrangement, not its label, as decisive.
You can read the core provision in section 56 of LASPO 2012 on legislation.gov.uk. Breaching it is a regulatory matter rather than a criminal offence, but the consequences for a regulated firm are serious.
Where referral fees remain lawful and common
Outside personal injury, referral fees are widely used and lawful. There is no general rule in UK law against paying for an introduction.
Examples of commercial referral fees that are normally allowed include:
- Estate agent and mortgage broker introductions.
- Business-to-business and commercial legal work.
- Accountancy and consultancy referrals.
- Introductions to insolvency practitioners, subject to their professional code.
For firms that regularly pass on work, a written arrangement is the sensible foundation — see our guide to Introducer Agreements for Insolvency Firms. If you are unsure whether a distressed client should be passed on at all, When to Refer a Client to an IP walks through the triggers. It also helps to be clear on the difference set out in Introducers vs Advisers: Where's the Line?, because that line changes what you may lawfully do and say.
How professional codes overlay the general law
Even where a referral fee is lawful, a professional code can restrict it. These codes sit on top of the general law and bind members of a regulated profession, so the professional test is often stricter than the statute.
Solicitors and the SRA
Solicitors may accept referrals and pay for introductions in non-prohibited work, but the SRA requires transparency. The client must be told about the arrangement and any fee involved. Our overview of the SRA Referral Fees Rules for Solicitors explains the detail, and Introducer Agreements: What the SRA Requires covers the paperwork behind it.
Insolvency practitioners and their code
Insolvency practitioners follow the Insolvency Code of Ethics, which treats referral payments as a potential threat to independence. The Insolvency Code of Ethics: Referrals Explained sets out that framework. Across every profession, the common thread of these legal referral fee rules is disclosure — see Fee and Referral Disclosure to Referred Clients for what a client should be told.
The specific insolvency position and R340.4
Insolvency practitioners can pay and receive referral fees, but they must work within the Insolvency Code of Ethics. Paragraph R340.4 treats a referral fee as a self-interest threat — the risk that a payment could influence professional judgement.
The practitioner must identify that threat and apply safeguards before accepting an appointment. In practice that means transparency, proper record-keeping and honest professional clearance. Our guide to Can Insolvency Practitioners Pay Referral Fees? covers the position in full, and Professional Clearance for IP Appointments explains the handover step between practitioners.
A few practical points recur for firms handling referred insolvency work:
- Run proper Due Diligence on Insolvency Introducers before relying on a source of work.
- Carry out Conflict Checks on Referred Insolvency Work so an introduction does not create a conflict.
- Complete AML Checks on Referred Insolvency Clients in line with the money laundering rules.
- Follow a clear process for Onboarding a Referred Distressed Director.
One arrangement to treat with real care is paying a referral fee through a third party. Routing Referral Fees Through a Solicitor: Risks explains why that structure can raise more questions than it answers. The Insolvency Act 1986 provides the statutory backdrop, and you can browse it via the Insolvency Act 1986 on legislation.gov.uk.
Frequently asked questions
Are disguised referral fees legal?
No. Dressing a banned referral fee up as a "marketing", "consultancy" or "administration" charge does not make it lawful. Regulators look at the substance of a payment, not its label, so a disguised fee in personal injury work still breaches the LASPO ban.
Are marketing fees the same as referral fees?
Not always. A genuine payment for advertising or a marketing service can be lawful even where referral fees are banned, provided it reflects the true value of the service and is not a referral fee by another name. The distinction is fact-specific.
Who enforces the referral fee rules?
The relevant regulator does. For solicitors that is the SRA; for insolvency practitioners it is their recognised professional body. You can also complain about an insolvency practitioner on gov.uk if you have concerns about conduct.
Do referral fees have to be disclosed to the client?
In regulated work, usually yes. Solicitors and insolvency practitioners must be transparent about referral arrangements, and non-disclosure is itself a breach even where the fee would otherwise be allowed.
This article is general information, not legal, financial or insolvency advice. The rules on referral fees turn on the specific facts, so firms and directors should speak to a regulated specialist about their own circumstances.
If you would like to talk it through, start an enquiry and Harbourfirst can introduce you to a regulated insolvency practitioner or solicitor. Harbourfirst is an introducer; it does not advise or act for you itself.